How to Plan for Nursing Home Care for Parents

The median annual cost of care in a skilled nursing facility in South Carolina is $42,000, according to a cost of care survey by long-term care insurance company Genworth. You can’t expect Medicare to cover it. Medicaid coverage doesn’t start in, until the value of your assets is reduced to $2,000, says The Columbia Regional Business Report’s recent article entitled “Nursing home care requires advance planning.”

Many people don’t know that to qualify for Medicaid, your assets have to be spent down to almost nothing. Planning for long-term care includes both insurance and financial planning. However, the long-term care insurance options are limited. There are only a few providers remaining in the industry, but it’s worth the effort to see what they have.

Long-term care insurance is a plan that lets you pay a premium in exchange for coverage for a stay in an assisted care facility, full-scale care facility, or even at home. Without a policy, those financial costs can be catastrophic.

Because the cost of long-term care is so high, begin planning for your later years as soon as possible. It’s likely that in the next few decades, when the baby boomer generation starts requiring long-term or assisted living care, paying for it could become a crisis.

For people who are starting to save for future care needs, financial planners earmark 10% to 15% of your income. If you’re older and see that you don’t have enough money saved, put away at least 20% of your income. IRS guidelines include catch-up provisions for people older than 50 for IRAs and 401(k)s.

Some group insurance plans offer long-term care options. There are some additions for life insurance policies that could extend living benefits for elder care. You should plan on paying for three years of long-term care.

How to pay for skilled care is just one of the issues a family may face in later years. You also should have a will, advance directives, medical or health care power of attorney and durable power of attorney in place to help your family with difficult decisions. Remember to make sure the beneficiaries on your insurance plans are up-to-date.

Talk to an attorney about late-life concerns.

It’s never too soon to develop some kind of plan that can ease the financial burden for you and your family.

Reference:  Columbia Regional Business Report (March 10, 2020) “Nursing home care requires advance planning

What Is So Important About Powers Of Attorney?

Powers of attorney can provide significant authority to another person, if you are unable to do so. These powers can include the right to access your bank accounts and to make decisions for you.

AARP’s article from last October entitled, “Powers of Attorney: Crucial Documents for Caregiving,” describes the different types of powers of attorney.

Just like it sounds, a specific power of attorney restricts your agent to taking care of only certain tasks, such as paying bills or selling a house. This power is typically only on a temporary basis.

A general power of attorney provides your agent with sweeping authority. The agent has the authority to step into your shoes and handle all of your legal and financial affairs.

The authority of these powers of attorney can stop at the time you become incapacitated. Durable powers of attorney may be specific or general. However, the “durable” part means your agent retains the authority, even if you become physically or mentally incapacitated. In effect, your family probably won’t need to petition a court to intervene, if you have a medical crisis or have severe cognitive decline like late stage dementia.

In some instances, medical decision-making is part of a durable power of attorney for health care. This can also be addressed in a separate document that is just for health care, like a health care surrogate designation.

There are a few states that recognize “springing” durable powers of attorney. With these, the agent can begin using her authority, only after you become incapacitated. Other states don’t have these, which means your agent can use the document the day you sign the durable power of attorney.

A well-drafted power of attorney helps your agent help you, because she can keep the details of your life addressed, if you cannot. That can be things like applying for financial assistance or a public benefit, such as Medicaid, or verifying that your utilities stay on and your taxes get paid. Attempting to take care of any of these things without the proper document can be almost impossible.

In the absence of proper incapacity legal planning, your loved ones will need to initiate a court procedure known as a guardianship or conservatorship. However, these hearings can be expensive, time-consuming and contested by family members who don’t agree with moving forward.

Don’t wait to do this. Every person who’s at least age 18 should have a power of attorney in place. If you do have a power of attorney, be sure that it’s up to date. Ask an experienced elder law or estate planning attorney to help you create these documents.

Reference: AARP (October 31, 2019) “Powers of Attorney: Crucial Documents for Caregiving”

What Do We Know about Early-Onset Dementia?

Rita Benezra Obeiter, 59, is a former pediatrician who was diagnosed several years ago with early-onset dementia, a rare form of the disease. When this occurs in people under age 65, the conditions cause additional and unique issues because they are so unexpected and because most of the potentially helpful programs and services are designed for and targeted to older people.

One issue is that doctors typically don’t look for the disease in younger patients. As a result, it can be months or even years before the right diagnosis is made and proper treatment can start.

WLNY’s recent article entitled “Some Health Care Facilities Say They’re Seeing More Cases Of Early-Onset Dementia Than Ever Before” reports that her husband Robert Obeiter left his job two years ago to care for her. She attends an adult day care, and aides help at home at night.

If Dementia is a generic term for diseases characterized by a decline in memory, language, and other thinking skills required to perform everyday activities, Alzheimer’s is the most common. The National Institute of Health reports that there’s approximately 200,000 Americans in their 40s, 50s, and early 60s with early onset Alzheimer’s.

One conference discussed a rise in early dementia because of the processed foods and fertilizers or the other environmental hazards, and there are definitely some genes more associated with Alzheimer’s—more so with early onset.”

There is no clear answer, and most of the treatments help to slow down the progression.

There is some research showing the Mediterranean diet can be protective, as well as doing cognitive exercises like crossword puzzles and Sudoku.

It’s true that no one can predict the future of their health, but there are ways financially that families can prepare. It can cost $150,000 a year or more. That’s why you should think about purchasing long term care insurance starting at the age of 40.

Long-term health insurance can pay for an aide to come into your home, and it can pay for the cost of assisted living. And, remember that health insurance doesn’t cover long-term care, nor does Medicare. Plus, everyone over the age of 18 needs a healthcare power of attorney and a financial POA.

Reference: WLNY (Feb. 12, 2020) “Some Health Care Facilities Say They’re Seeing More Cases Of Early-Onset Dementia Than Ever Before”

Planning for Long-Term Care Before It’s Too Late

Starting to plan for elder care should happen when you are in your 50s or 60s. By the time you are 70, it may be too late. With the national median annual cost of a private room in a nursing facility coming in at more than $100,000, not having a plan can become one of the most expensive mistakes of your financial life. The article “Four steps you can take to safeguard your retirement savings from this risk” from CNBC says that even if care is provided in your own home, the annual median national cost of in-home skilled nursing is $87.50 per visit.

There are fewer and fewer insurance companies that offer long-term care insurance policies, and even with a policy, there are many out-of-pocket costs that also have to be paid. People often fail to prepare for the indirect cost of caregiving, which primarily impacts women who are taking care of older, infirm male spouses and aging parents.

More than 34 million Americans provided unpaid care to older adults in 2015, with an economic value of $522 billion per year.

That’s not including the stress of caring for loved ones, watching them decline and needing increasingly more help from other sources.

The best time to start planning for the later years is around age 60. That’s when most people have experienced their parent’s aging and understand that planning and conversations with loved ones need to take place.

Living Transitions. Do you want to remain at home as long as is practicable, or would you rather move to a continuing care retirement community? If you are planning on aging in place in your home, what changes will need to be made to your home to ensure that you can live there safely? How will you protect yourself from loneliness, if you plan on staying at home?

Driving Transitions. Knowing when to turn in your car keys is a big issue for seniors. How will you get around, if and when you are no longer able to drive safely? What transportation alternatives are there in your community?

Financial Caretaking. Cognitive decline can start as early as age 53, leading people to make mistakes that cost them dearly. Forgetting to pay bills, paying some bills twice, or forgetting accounts, are signs that you may need some help with your financial affairs. Simplify things by having one checking, one savings account and three credit cards: one for public use, one for automatic bill-paying and a third for online purchases.

Healthcare Transitions. If you don’t already have an advance directive, you need to have one created, as part of your overall estate plan. This provides an opportunity for you to state how you want to receive care, if you are not able to communicate your wishes. Not having this document may mean that you are kept alive on a respirator, when your preference is to be allowed to die naturally. You’ll also need a Health Care Power of Attorney, a person you name to make medical decisions on your behalf when you cannot do so. This person does not have to be a spouse or an adult child—sometimes it’s best to have a trusted friend who you will be sure will follow your directions. Make sure this person is willing to serve, even when your documented wishes may be challenged.

Reference: CNBC (Jan. 31, 2020) “Four steps you can take to safeguard your retirement savings from this risk”

How Can Long-Distance Caregivers Help Loved Ones?

A recent article noted that long-distance caregivers have the same concerns and pressures as local caregivers, perhaps even more. They spend about twice as much on caregiving as people caring for a loved one nearby, because they’re more likely to need to hire help, take uncompensated time off work and pay for travel. A huge challenge for this group is just staying informed and assured that the person needing care is in good hands. As a result, long-distance caregivers must have good communication and a solid team on the ground.

AARP’s recent article entitled “Long-Distance Caregiving: 5 Key Steps to Providing Care From Afar” provides us with five steps to staying informed and effective as a long-distance caregiver and thoughts for implementing the measures.

  1. Be sure you have access to information. Having a means of receiving good information and possessing legal authority to make financial and health-care decisions is critical for all primary caregivers, but it’s even greater for ones caring from a distance. Arrange as much as you can during an in-person visit.
  • Start the discussion on finances and map out with your loved one how to pay for health care and everyday expenses.
  • Ask whether your parent or other senior is able to sign the forms or make the calls necessary to give doctors, hospitals and insurers permission to share information with you or another trusted family member. This should include banks and utilities.
  • Be sure the senior has designated a durable power of attorney for health care and financial decisions.
  • Know what to do in an emergency, as far as access to the home by a neighbor, if needed.
  1. Create your on-the-ground support team. Don’t try to do it all, especially if your loved one has more serious or complicated health issues. In addition to healthcare professionals, ask friends, family and community groups to join a network of caregiving helpmates. Remember to add your loved one as part of the team.
  • Assign roles and tasks, that the members of the team are willing and able to do.
  • Create a list with contact info for everyone and keep it up to date.
  1. Consider hiring a reputable caregiving professional. They’re often called a geriatric care manager, aging life care manager, or eldercare navigator or coordinator. These professionals are frequently licensed nurses or social workers who can also be valuable mediators or sounding boards, when family members disagree on care decisions.
  • Verify the person’s professional certifications, see how long the person has been in the field and request references.
  • Care managers can charge $50 to $200 an hour. Medicare doesn’t cover this service, nor do most health insurance plans. However, if you can handle it financially, an experienced manager may be able to save your family time, money and stress with even a short call.
  1. Find ways to communicate regularly with your local support group and loved one. You should leverage technology. With permission, place video monitors, wearable activity trackers, remote door locks to prevent wandering (if the care recipient has dementia) and even electronic pill dispensers that can tell you if someone has taken the prescribed medications.
  2. Leverage your visits. Nothing’s better than an in-person visit. When you can manage one, come with a list of things you need to know or discuss.
  • Interview possible home aides or house cleaners or meet with social workers or other professionals involved in your loved one’s care to discuss any concerns.
  • Look for signs of abuse, which means monitoring your senior’s checking account and see if there are any irregularities and look for red flags of physical or emotional mistreatment, like bruises, unexplained injuries, or a sudden change in personality. Note if your family member talks about a person you’ve never met who visits often and has been “very helpful.”

Although you may have several practical tasks to tick off your list, it’s important to spend quality time with your loved one. And seek the advice of a qualified elder law attorney, if you have any questions.

Reference: AARP (Oct. 30, 2019) “Long-Distance Caregiving: 5 Key Steps to Providing Care From Afar”

The Need for Long-Term Care Insurance

More than 70% of seniors 65 and over will need some type of long-term care in their lifetime. This could be a few months of home health aide assistance or years in an assisted living facility or nursing home. Unfortunately, Medicare won’t pay for long-term care, which means the majority of seniors could have some very big bills.

Motley Fool’s recent article entitled “Only 16% of Older Americans Have Made This Smart Retirement Move” says that’s the reason why it’s critical to secure long-term care insurance. Your 50s are generally when it’s considered to be the best time to apply. At that point, you’re not signing up to pay premiums for too long, but you’re also more likely to get approved for a policy and get a discount on its cost based on your health. However, research from TD Ameritrade found that just 16% of Americans in their 50s have a long-term care policy.

Many seniors don’t know just how expensive long-term care is, until they actually need it. Medicare generally doesn’t cover this because its’ considered custodial care, another term for non-medical assistance. Medicare will pay for seniors to recuperate from injury or illness, but often, the need for long-term care isn’t a result of that situation.

A long-term care insurance policy isn’t cheap. Your premium costs will depend on a number of factors, such as your age at the time of your application, the state of your health and the specific amount of coverage you want.

For example, a 55-year-old man in New Jersey applying today could receive a benefit of $150 per day for up to two years. Let’s say that he ends up spending two years in an assisted living facility that costs $150 per day.

That’s going to total $109,500. Assume you also pay an annual premium of $1,195.43 for 20 years to obtain that benefit, for a total of $23,908.60. Even with the large amount of money you’ll end up paying in premiums, it’s nothing when compared to the $109,500 you might otherwise be required to shell out for your care.

It’s impossible to predict whether you’ll need long-term care, but if you’d rather not risk bankrupting your estate and yourself, look at a policy. Even though it’s ideal to apply while you’re in your 50s, you may qualify for affordable coverage in your 60s. Therefore, despite the preferred application window being closed, it may be beneficial to see what options are available to you now.

Reference:  Motley Fool (Jan. 25, 2020) “Only 16% of Older Americans Have Made This Smart Retirement Move”

When Do I Need an Elder Law Attorney?

Elder law is different from estate law, but they frequently address many of the same issues. Estate planning contemplates your finances and property to best provide for you and your family while you’re still alive but incapacitated. It also concerns itself with the estate you leave to your loved ones when you die, minimizing probate complications and potential estate tax bills. Elder law contemplates these same issues but also the scenario when you may need some form of long-term care, even your eligibility for Medicaid should you need it.

A recent article from The Balance’s asks “Do You or a Family Member Need to Hire an Elder Law Attorney?” According to the article there are a variety of options to adjust as economically and efficiently as possible to plan for all eventualities. An elder law attorney can discuss these options with you.

Medicaid is a complicated subject, and really requires the assistance of an expert. The program has rigid eligibility guidelines in the event you require long-term care. The program’s benefits are income- and asset-based. However, you can’t simply give everything away to qualify, if you think you might need this type of care in the near future. There are strategies that should be implemented because the “spend down” rules and five-year “look back” period reverts assets or money to your ownership for qualifying purposes, if you try to transfer them to others. An elder law attorney will know these rules well and can guide you.

You’ll need the help and advice of an experienced elder law attorney to assist with your future plans, if one or more of these situations apply to you:

  • You’re in a second (or later) marriage;
  • You’re recently divorced;
  • You’ve recently lost a spouse or another family member;
  • Your spouse is incapacitated and requires long-term care;
  • You own one or more businesses;
  • You have real estate in more than one state;
  • You have a disabled family member;
  • You’re disabled;
  • You have minor children or an adult “problem” child;
  • You don’t have children;
  • You’d like to give a portion of your estate to charity;
  • You have significant assets in 401(k)s and/or IRAs; or
  • You have a taxable estate for estate tax purposes.

If you have any of these situations, you should seek the help of an elder law attorney.

If you fail to do so, you’ll most likely give a sizeable percentage of your estate to the state, an ex-spouse, or the IRS.

State probate laws are very detailed as to what can and can’t be included in a will, trust, advance medical directive, or financial power of attorney. These laws control who can and can’t serve as a personal representative, trustee, health care surrogate, or attorney-in-fact under a power of attorney.

Hiring an experienced elder law attorney can help you and your family avoid simple but expensive mistakes, if you or your family attempt this on your own.

Reference: The Balance (Jan. 21, 2020) “Do You or a Family Member Need to Hire an Elder Law Attorney?”

Should I Purchase Long-Term Care Insurance?

According to Covering Katy’s recent article entitled “How to Protect Yourself From Long-term Care Cost,” to answer the question of long-term care, think about two variables: your likelihood of needing long-term care and the cost of the care.

Government statistics show that a person who’s 65 today has nearly a 70% chance of eventually needing some kind of long-term care. The average cost for a private room in a nursing home is about $100,000 per year, and a home health aide costs about $50,000 per year. When you do the math, your chances of needing long-term care are good and it’s expensive. If you needed several years of long-term care, it could seriously deplete your savings.

Since Medicare typically pays only a small part of long-term care costs, you should consider the following options for meeting these expenses:

You could “self-insure” against long-term care expenses, by setting aside some of your investment portfolio for this. However, it looks like you’d have to save a lot of money before you felt you were truly protected. This could be especially tough with the need to save and invest for the other expenses associated with retirement.

When you buy long-term care insurance, you’re moving the risk of paying for long-term care from yourself to an insurance carrier. Some LTC policies pay costs for a set number of years, while others cover you for life. Shop around for a policy that offers the combination of features you think best meet your needs. Long-term care gets more expensive as you get older. Therefore, if you’re interested in this type of coverage, don’t delay in your search.

A “hybrid” policy, like life insurance with a long-term care/chronic illness rider, combines long-term care benefits with those offered by a traditional life insurance policy. As a result, if you were to purchase a hybrid policy, and you never needed long-term care, your policy would pay a death benefit to your beneficiary. Conversely, if you ever do require long-term care, your policy will pay benefits for those expenses. The amount of money available for LTC can exceed the death benefit dramatically. There are quite a few different types of hybrid policies, so do your research before choosing a policy.

While you may decide you’re willing to take the chance of never requiring any type of long-term care, if you think that’s a risk you’d rather not take, look into all your coverage options thoroughly.

Reference: Covering Katy (Jan. 13, 2020) “How to Protect Yourself From Long-term Care Costs”

Life Insurance Is a Good Estate Planning Tool but Needs to Be Done Carefully

With proper planning and the help of a seasoned estate planning or probate attorney, insurance money can pay expenses, like estate tax and avoid the need to liquidate other assets, says FEDweek’s recent article entitled “Errors to Avoid in Using Life Insurance for Estate Planning.”

As an example, let’s say that Reggie passes away and leaves a large estate to his daughter Veronica. There’s a big estate tax that’s due. However, the majority of Reggie’s assets are tied up in real estate and an IRA. In light of this, Veronica might not want to proceed directly into a forced sale of the real estate. However, if she taps the inherited IRA to raise cash, she’ll be required to pay income tax on the withdrawal and forfeit a very worthwhile opportunity for extended tax deferral.

If Reggie plans ahead, he could purchase insurance on his own life. The proceeds could be used to pay the estate tax bill. As a result, Veronica can retain the real estate, while taking only minimum required distributions (RMDs) from the inherited IRA.

If the insurance policy is owned by Veronica or by a trust, the proceeds probably won’t be included in Reggie’s estate and won’t increase her estate taxes.

Along these same lines, here are some common life insurance errors to avoid:

Designating your estate as beneficiary. When you make this move, it puts the insurance policy proceeds into your estate, exposing it to estate tax and your creditors. Your executor will also have to deal with more paperwork, if your estate is the beneficiary. Instead, name the appropriate people or charities.

Designating just a single beneficiary. You should name at least two “backup” beneficiaries. This will decrease any confusion, if the primary beneficiary predeceases you.

Throwing the copy of your life insurance policy in the “file and forget” drawer. You should review your policies at least once every few years. If the beneficiary is an ex-spouse or someone who’s passed away, make the appropriate changes and get a confirmation from the insurance company in writing.

Failing to carry adequate insurance. If you have a youngster, it undoubtedly requires hundreds of thousands of dollars to pay all her expenses, such as college bills, in the event of your untimely death.

Talk to a qualified and experienced estate planning attorney about the particulars of your situation.

Reference: FEDweek (Dec. 12, 2019) “Errors to Avoid in Using Life Insurance for Estate Planning”

What are the Major Changes to Social Security in 2020?

Social Security supports millions of Americans, giving them vital benefits in retirement or if they are disabled. For many of those recipients, Social Security contributes most or all of their income.

Motley Fool’s recent article, “4 Must-Know Facts About Social Security for 2020,” says that to get as much as you can from Social Security, you need to understand how each year’s changes will impact you. With benefit checks, retirement age, maximum benefit calculations and Social Security payroll taxes, there’s quite a bit for people to monitor with Social Security in 2020. Let’s look at few big changes:

  1. Next year’s cost-of-living adjustment. Every year, Social Security gives those receiving benefits a cost-of-living increase in their monthly checks. The amount varies from year to year, based on inflation figures. The SSA recently announced that it would increase benefit checks by 1.6% at the start of 2020. This bump will impact seniors in different ways. The typical retired worker will see monthly benefits rise from $1,479 to $1,503. For couples receiving two benefit checks, the typical total will rise by $40 to $2,531 per month. If you’re receiving Social Security benefits based on a family member’s work history, you’ll also see increases. Widowed parents with two children will see $46 more per month ($2,934). Surviving spouses without eligible children will receive a $22 per month increase to $1,422, while the typical disabled worker will see checks go up $20 to $1,258 per month.
  2. Early retirees in 2020 will see a higher full retirement age. The SSA figures your benefits using a formula that anticipates that you’ll claim Social Security when you reach full retirement age. If you claim earlier, then you’ll receive less than if you had waited. However, for those turning 62 in 2020, full retirement age will be slightly higher than it was for those turning 62 in 2019. Those born in 1958 will have a full retirement age of 66 and eight months—two months older than it was for people who were born in 1957 and reached 62 in 2019. Thus, 2020’s 62-year-olds will take a 28.33% reduction in their monthly payment, compared to what they’d get at full retirement age. That’s a little more than the 27.5% reduction that applied to 2019’s 62-year-olds.
  3. High earners can anticipate a larger maximum Social Security benefit. If you retire in 2020 and qualify for the maximum benefit, you’ll see a bigger check than those who retired this year. If you work to full retirement age before collecting benefits, your maximum amount for Social Security benefits will be $3,011. That’s an increase of $150 from 2019.

However, not every increase will be that large, because receiving the maximum depends significantly on exactly when you elect to retire and take benefits. For those claiming Social Security at 62, the maximum monthly benefit will go up $56 to $2,265. Those retiring at 65 will see a $100 increase to $2,857 per month. However, for those retiring at age 70, the increase will be minimal, increasing only $20 to $3,790 per month. Even if you end up short of the absolute maximum, those earning higher incomes can generally expect to see a boost to what they’ll receive.

  1. High-income workers can plan on paying more in Social Security taxes. Payroll taxes are the main source of revenue for Social Security, and the maximum Social Security payroll tax is going up. In 2020, $4,800 more in earnings will be subject to payroll tax, maxing out at $137,700. Between the 6.2% employee portion and the matching 6.2% employers have to pay, a total of 12.4% of your earnings will be taken by federal government.

Those earning in excess of $137,700, will have their withholding increase by $297.60. Self-employed workers will see their maximum taxes rise by $595.20. However, most workers won’t see any change at all, because typical Americans earn far less than $137,700, and the same 6.2% rate will continue to apply on total earnings below that amount.

Reference: Motley Fool (October 27, 2019) “4 Must-Know Facts About Social Security for 2020”

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